Tax and Legal for Traders
What you keep after taxes is what matters.
Disclaimer
Consult qualified tax professionals. Laws vary by country.
Taxable Events
- Realized gains when closing trades
- Swaps may be taxable
- Currency conversion gains
US Treatment
- Forex: Section 988 (ordinary income)
- Or elect Section 1256 (60/40)
- Futures: automatic 1256
UK Treatment
- Spread betting: often tax-free
- CFDs: Capital Gains Tax
- Status matters
Record Keeping
- Every trade entry and exit
- Date and time
- Profit or loss
- Screenshots recommended
Deductible Expenses
- Trading software
- Data feeds
- Education courses
- Computer equipment
- Home office portion
Business Structure
When to Incorporate
- Consistently profitable
- Significant trading income
- Want deductions
- Need protection
Action Items
- Track all trades from day one
- Understand your country rules
- Consult tax professional
- Consider business structure
- Plan, do not react